Morning Read: Greece Slumps 6%, But There’s, Ehem, No Euro Crisis

By Brendan Conway

Market check: Greece’s Athex Composite is slumping 6.4%. Why, exactly? No reason except traders’ latest fear of Europe’s economic mess. It may not even be entirely the euro-zone crisis. Italy is grabbing headlines as its politicians’ coalition-forming efforts have stalled. Cyprus’ bailout raises the question of who pays the next time a country faces a banking crisis. But as Brian Blackstone points out in this morning’s Ahead of the Tape column, it might not matter if Europe’s economy wasn’t such a mess. “Even stable GDP, when it arrives, would be little cause for cheer,” he writes. Euro-zone output would need to rise by 2% to make a dent in unemployment, but that’s nowhere to be seen and might not be for years. “Europe’s crisis responders have found ways to put out fires at the last minute, keeping the euro intact. Unless they can help turn around the bloc’s grim growth prospects, though, the current economic fatigue could become a persistent malaise.” Here in teh U.S., looks for Global X FTSE Greece 20 ETF (GREK) to slump early, with smaller declines in the iShares MSCI Italy Capped Index Fund (EWI) and iShares MSCI Spain Capped Index Fund (EWP).

Fund watch: Worried about a stock-market correction? Susquehanna Financial has an idea: Buy put options on the SPDR S&P 500 ETF (SPY). Buying a three-month put option that guards you against drops of roughly 5% or greater costs about 1.30% of the ETF’s value, and historically speaking, it’s not expensive to do that — the cost is right around the five-year low on a percentage basis of the ETF’s price. Of course, you don’t buy options solely on the basis of what’s happened in the past — you buy them with an eye for what you think is coming in the future. The market consensus is pretty clearly saying Full Steam Ahead for stocks, which is why the options are inexpensive. The consensus is often wrong, and it’s worth noting that stocks rarely go straight up, but this selloff, like most any, has been awfully tough to see coming. Maybe it simply won’t come at all.

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As exchange-traded funds and other investing vehicles have ballooned in number, the task of figuring out what works well and what doesn’t has only gotten harder. Barrons.com’s Focus on Funds looks under the hood of ETFs, mutual funds and hedge funds for overlooked values, actionable ideas and the latest pitfalls for fund investors.

Chris Dieterich has covered the U.S. stock market for The Wall Street Journal and Dow Jones Newswires. He is a graduate of Regis University and the Missouri School of Journalism.